We point out in this chapter that the organizational form of a business will determine the amount of regulation that business experiences. Furthermore, business owners will have different rights and responsibilities according to the organizational form. Although you will learn about the major organizational forms later in this chapter, you can prepare to use your critical thinking skills while you consider business associations by asking yourself the following questions.
1. This question is not a formal critical thinking question, but it lays the groundwork for critical thinking about forms of business organization. Think about the businesses with which you interact every day. For example, where do you buy groceries? Who cuts your hair? Where did you buy this book? Why should the community even care whether these businesses are owned by a single person or by hundreds of shareholders? Clue: Ask yourself what the community expects from businesses and how these different forms of ownership would affect the extent to which those expectations are fulfilled.
2. Joan wants to open a business that specializes in selling fine wines. She believes that, as long as she follows the law of selling alcohol only to individuals 21 years of age or older, the government should not impose any other regulation on her business activity. What ethical norm seems to dominate Joan’s thinking? Clue: Think about the list of ethical norms in Chapter 1. Which norm seems most consistent with little or no governmental regulation? Which ethical norm seems to conflict with the idea of little governmental regulation?
3. One of the factors that might influence business owners to choose one organizational form over another is the liability associated with that organizational form. For example, in a sole proprietorship, the owner is liable for all losses, whereas owners in a corporation have limited liability. Vanessa has a chance to be either a sole proprietor or a shareholder in a corporation. She chooses to become a sole proprietor, even though she considers this option to be riskier. Which ethical norms might be guiding her decision to become a sole proprietor? Clue: Look closely at the list of ethical norms. Which norms seem consistent with Vanessa’s choice? Can you identify any other ethical norms that may be influencing her decision?